Nikhil Gangil’s Post

When ROIC > WACC = 𝗩𝗮𝗹𝘂𝗲 𝗰𝗿𝗲𝗮𝘁𝗶𝗼𝗻 𝘀𝗶𝗴𝗻 ✅. The company is earning returns above what its investors expect [𝘉𝘢𝘴𝘦𝘥 𝘰𝘯 𝘵𝘩𝘦 𝘳𝘪𝘴𝘬 𝘢𝘴𝘴𝘰𝘤𝘪𝘢𝘵𝘦𝘥 𝘸𝘪𝘵𝘩 𝘵𝘩𝘦 𝘤𝘰𝘮𝘱𝘢𝘯𝘺'𝘴 𝘪𝘯𝘷𝘦𝘴𝘵𝘮𝘦𝘯𝘵𝘴 𝘢𝘭𝘵𝘦𝘳𝘯𝘢𝘵𝘪𝘷𝘦]. The company is creating economic value for its shareholders. Here's what this means ⬇️ : 👉 𝗥𝗢𝗜𝗖: This measures the efficiency with which a company is utilizing its capital to generate profits. It's calculated by dividing the company's NOPAT [𝘯𝘦𝘵 𝘰𝘱𝘦𝘳𝘢𝘵𝘪𝘯𝘨 𝘱𝘳𝘰𝘧𝘪𝘵 𝘢𝘧𝘵𝘦𝘳 𝘵𝘢𝘹] by its invested capital [𝘸𝘩𝘪𝘤𝘩 𝘪𝘯𝘤𝘭𝘶𝘥𝘦𝘴 𝘣𝘰𝘵𝘩 𝘦𝘲𝘶𝘪𝘵𝘺 𝘢𝘯𝘥 𝘥𝘦𝘣𝘵, 𝘥𝘦𝘤𝘳𝘦𝘢𝘴𝘦𝘥 𝘧𝘰𝘳 𝘦𝘹𝘤𝘦𝘴𝘴 𝘤𝘢𝘴𝘩] 👉 𝗪𝗔𝗖𝗖:  Average rate of return a company is expected to pay to its investors [𝘣𝘰𝘵𝘩 𝘥𝘦𝘣𝘵 𝘢𝘯𝘥 𝘦𝘲𝘶𝘪𝘵𝘺 𝘩𝘰𝘭𝘥𝘦𝘳𝘴]. 𝗪𝗵𝗮𝘁 𝗶𝗳 𝗥𝗢𝗜𝗖 𝗲𝘅𝗰𝗲𝗲𝗱𝘀 𝗪𝗔𝗖𝗖: This is generally seen as a positive sign and suggests that the company is creating value for its shareholders. It implies that the company's investments are • productive and • that it's effectively utilizing the funds

When ROIC > WACC = 𝗩𝗮𝗹𝘂𝗲 𝗰𝗿𝗲𝗮𝘁𝗶𝗼𝗻 𝘀𝗶𝗴𝗻 ✅. The company is earning returns above what its investors expect [𝘉𝘢𝘴𝘦𝘥 𝘰𝘯 𝘵𝘩𝘦 𝘳𝘪𝘴𝘬 𝘢𝘴𝘴𝘰𝘤𝘪𝘢𝘵𝘦𝘥 𝘸𝘪𝘵𝘩 𝘵𝘩𝘦 𝘤𝘰𝘮𝘱𝘢𝘯𝘺'𝘴 𝘪𝘯𝘷𝘦𝘴𝘵𝘮𝘦𝘯𝘵𝘴 𝘢𝘭𝘵𝘦𝘳𝘯𝘢𝘵𝘪𝘷𝘦]. The company is creating economic value for its shareholders. Here's what this means ⬇️ : 👉 𝗥𝗢𝗜𝗖: This measures the efficiency with which a company is utilizing its capital to generate profits. It's calculated by dividing the company's NOPAT [𝘯𝘦𝘵 𝘰𝘱𝘦𝘳𝘢𝘵𝘪𝘯𝘨 𝘱𝘳𝘰𝘧𝘪𝘵 𝘢𝘧𝘵𝘦𝘳 𝘵𝘢𝘹] by its invested capital [𝘸𝘩𝘪𝘤𝘩 𝘪𝘯𝘤𝘭𝘶𝘥𝘦𝘴 𝘣𝘰𝘵𝘩 𝘦𝘲𝘶𝘪𝘵𝘺 𝘢𝘯𝘥 𝘥𝘦𝘣𝘵, 𝘥𝘦𝘤𝘳𝘦𝘢𝘴𝘦𝘥 𝘧𝘰𝘳 𝘦𝘹𝘤𝘦𝘴𝘴 𝘤𝘢𝘴𝘩] 👉 𝗪𝗔𝗖𝗖:  Average rate of return a company is expected to pay to its investors [𝘣𝘰𝘵𝘩 𝘥𝘦𝘣𝘵 𝘢𝘯𝘥 𝘦𝘲𝘶𝘪𝘵𝘺 𝘩𝘰𝘭𝘥𝘦𝘳𝘴]. 𝗪𝗵𝗮𝘁 𝗶𝗳 𝗥𝗢𝗜𝗖 𝗲𝘅𝗰𝗲𝗲𝗱𝘀 𝗪𝗔𝗖𝗖: This is generally seen as a positive sign and suggests that the company is creating value for its shareholders. It implies that the company's investments are • productive and • that it's effectively utilizing the funds

When ROIC > WACC = 𝗩𝗮𝗹𝘂𝗲 𝗰𝗿𝗲𝗮𝘁𝗶𝗼𝗻 𝘀𝗶𝗴𝗻 ✅. The company is earning returns above what its investors expect [𝘉𝘢𝘴𝘦𝘥 𝘰𝘯 𝘵𝘩𝘦 𝘳𝘪𝘴𝘬 𝘢𝘴𝘴𝘰𝘤𝘪𝘢𝘵𝘦𝘥 𝘸𝘪𝘵𝘩 𝘵𝘩𝘦 𝘤𝘰𝘮𝘱𝘢𝘯𝘺'𝘴 𝘪𝘯𝘷𝘦𝘴𝘵𝘮𝘦𝘯𝘵 𝘢𝘭𝘵𝘦𝘳𝘯𝘢𝘵𝘪𝘷𝘦]. The company is creating economic value for its shareholders. Here's what this means ⬇️ : 👉 𝗥𝗢𝗜𝗖: This measures the efficiency with which a company is utilizing its capital to generate profits. It's calculated by dividing the company's NOPAT [𝘯𝘦𝘵 𝘰𝘱𝘦𝘳𝘢𝘵𝘪𝘯𝘨 𝘱𝘳𝘰𝘧𝘪𝘵 𝘢𝘧𝘵𝘦𝘳 𝘵𝘢𝘹] by its invested capital [𝘸𝘩𝘪𝘤𝘩 𝘪𝘯𝘤𝘭𝘶𝘥𝘦𝘴 𝘣𝘰𝘵𝘩 𝘦𝘲𝘶𝘪𝘵𝘺 𝘢𝘯𝘥 𝘥𝘦𝘣𝘵, 𝘥𝘦𝘤𝘳𝘦𝘢𝘴𝘦𝘥 𝘧𝘰𝘳 𝘦𝘹𝘤𝘦𝘴𝘴 𝘤𝘢𝘴𝘩] 👉 𝗪𝗔𝗖𝗖:  Average rate of return a company is expected to pay to its investors [𝘣𝘰𝘵𝘩 𝘥𝘦𝘣𝘵 𝘢𝘯𝘥 𝘦𝘲𝘶𝘪𝘵𝘺 𝘩𝘰𝘭𝘥𝘦𝘳𝘴]. 𝗪𝗵𝗮𝘁 𝗶𝗳 𝗥𝗢𝗜𝗖 𝗲𝘅𝗰𝗲𝗲𝗱𝘀 𝗪𝗔𝗖𝗖: This is generally seen as a positive sign and suggests the company is creating value for its shareholders. It implies that the company's investments are • productive and • that it's effectively utilizing the funds

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Convertible notes can be an attractive capital-raising option for many #publiccompanies, yet many aspects of the instrument are not intuitive and therefore often poorly understood. Latham’s updated primer demystifies the ever-evolving landscape of convertible notes, breaking down the financial, #regulatory, and strategic nuances that shape their use today. Read our comprehensive guide to unlock the potential of convertible notes in your capital-raising strategy: https://lw.link/fzMZyn #capitalmarkets

Important Update for CIT Shareholders! Today, January 5, 2025, is the last day to secure your eligibility for the proposed 13% dividend from Citizen Investment Trust (CIT). For more: https://lnkd.in/dtrnmVD5 Don’t miss this opportunity to secure your dividends and participate in CIT’s 30th Annual General Meeting! #CitizenInvestmentTrustDividends #CITBookClosure #CITAGM2025 #CITDividendDistributionNepal #CitizenInvestmentTrustBonusShares #CashDividendFromCIT #NepalStockDividendUpdates #ICTFrame

✨ WACC Cheat Sheet What is the Weighted Average Cost of Capital (WACC)? 🤔 💡WACC is the average after-tax expense of capital for a company from all of its various sources. This includes common stock, preferred stock, bonds, and other hybrid debt & equity instruments. WACC is the mean rate a company pays to fund its operations. ⚖️ FORMULA WACC = [(E/V) x Re] + [(D/V) x Rd x (1 - Tc)] E = Market value of the firm’s equity D = Market value of the firm’s debt V = E + D Re = Cost of equity Rd = Cost of debt Tc = Corporate tax rate WACC is computed by multiplying the cost of each capital source (debt and equity) by its respective weight and summing the products together. WACC serves as a benchmark for evaluating both projects & acquisitions for both companies and investors. WACC also functions as the discount rate for future cash flows when performing a discounted cash flow analysis. Projects or acquisitions should only proceed when the expected return is greater than WACC. Example: E = $750 MM D = $250 MM V = $1,000 MM Re = 12% Rd = 8% Tc = 25% WACC = [$750/$1,000) x 12%] + [($250/ $1,000) x 8% x (1 - 25%)] = 11.5%

HOW TO BUILD WACC ( 𝗪𝗲𝗶𝗴𝗵𝘁𝗲𝗱 𝗮𝘃𝗲𝗿𝗮𝗴𝗲 𝗰𝗼𝘀𝘁 𝗼𝗳 𝗰𝗮𝗽𝗶𝘁𝗮𝗹 )? WACC is a common way to determine the required rate of return because it expresses the return that shareholders demand to provide the company with capital. If a company's stock is highly volatile or its debt carries considerable risk, its WACC will increase as investors expect higher returns to compensate for the higher risk. Here is the components and adjustment factors +Risk free rate +Equity premium rate x Adjusted for releveled industry beta +Size risk premium +Country risk premium +Specific risk premium 𝗖𝗼𝘀𝘁 𝗼𝗳 𝗲𝗾𝘂𝗶𝘁𝘆 +Cost of debt before tax -Tax effects +Cost of debt after tax 𝗖𝗼𝘀𝘁 𝗼𝗳 𝗱𝗲𝗯𝘁 Calculating weighted average 𝗪𝗲𝗶𝗴𝗵𝘁𝗲𝗱 𝗮𝘃𝗲𝗿𝗮𝗴𝗲 𝗰𝗼𝘀𝘁 𝗼𝗳 𝗰𝗮𝗽𝗶𝘁𝗮𝗹

Have you heard about WACC? Weighted average cost of capital (WACC) is a company's 𝐚𝐯𝐞𝐫𝐚𝐠𝐞 𝐚𝐟𝐭𝐞𝐫-𝐭𝐚𝐱 𝐜𝐨𝐬𝐭 𝐨𝐟 𝐜𝐚𝐩𝐢𝐭𝐚𝐥 from all sources, including common stock, preferred stock, bonds, and other forms of debt. It represents the 𝐚𝐯𝐞𝐫𝐚𝐠𝐞 𝐫𝐚𝐭𝐞 𝐭𝐡𝐚𝐭 𝐚 𝐜𝐨𝐦𝐩𝐚𝐧𝐲 𝐞𝐱𝐩𝐞𝐜𝐭𝐬 𝐭𝐨 𝐩𝐚𝐲 𝐭𝐨 𝐟𝐢𝐧𝐚𝐧𝐜𝐞 𝐢𝐭𝐬 𝐛𝐮𝐬𝐢𝐧𝐞𝐬𝐬. WACC is a common way to determine the required rate of return (RRR) because it expresses, in a single number, the return that bondholders and shareholders demand in return for providing the company with capital. Common use :- 1) WACC is commonly used as a 𝐡𝐮𝐫𝐝𝐥𝐞 𝐫𝐚𝐭𝐞 against which companies and investors can gauge the desirability of a given project or acquisition. 2) WACC is also used as the 𝐝𝐢𝐬𝐜𝐨𝐮𝐧𝐭 𝐫𝐚𝐭𝐞 𝐟𝐨𝐫 𝐟𝐮𝐭𝐮𝐫𝐞 𝐜𝐚𝐬𝐡 𝐟𝐥𝐨𝐰𝐬 in discounted cash flow analysis. #Learning #WACC #CostofCapital #Finance #Discountrate #Cashflow